Discounting of future cash flows or Discounted Cash Flow (DCF)

Author : Kristen

Discounting of future cash flows or Discounted Cash Flow (DCF)

Unlike the capitalisation or return method, the discounting of future cash flows offers significant advantages, as it permits the use of parameters such as financing, administration, and maintenance or renovation costs, as well as the development of rental status and risks. All of this is offered on a 5 to 10 year horizon based on projected cash flows that will allow you to determine the future value of the property. But these undeniable advantages should not overshadow the method's paradoxical nature: to calculate the current value of the property, you must first estimate the value in 5 or 10 years. This estimation is based on predictions of cash flows that could be strongly influenced by the flux in the parameters used.

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